Boca Electronics, a manufacturer of semiconductor components was established in Houston, Texas in 2002 after spinning off its parent company. Originally a branch of Vissay Inc., Boca Electronics had a solid customer base and strong sales with some major firms such as IBM, Compaq and Motorola. Semiconductors included a wide array of products that were broken down according to their application and material. Some of their main products include microprocessors, light-emitting diodes (LEDs), rectifiers, and suppressors. Boca Electronics operated on a mainframe system that it inherited from its parent company, and used additional stand-alone systems to perform many of its other business functions. For the last four years the company had performed well financially, so little concern had been given to the business operations. However, recent slowdowns in the economy and an increase in competition in the semiconductor industry had forced Boca Electronics to take another look at the way it operated its business.
Ron Butler, the purchasing manager at Boca Electronics, was responsible for ordering raw materials and ensuring that their delivery was on time and met production requirements. Ron used his own forecasting software to determine purchasing needs based on past sales. While this worked most of the time, Ron often found himself scrambling to meet large customer orders at the last minute and was forced to expedite a lot of orders to meet the production needs. Ron felt this was due largely to the lack of communication between his department and the sales force. Although he received production forecasts and projected sales from the sales department, it occurred on an irregular basis, and the forecasts would often change by the time he had placed orders to the suppliers. In addition, Ron had a difficult time synchronizing with suppliers and determining factors such as lead times and product prices. He had previously recommended a new software system that would integrate with suppliers of key components but the proposal was turned down by senior management due to a “current lack of need for such investment.”
Boca Electronics also faced issues regarding its cash flows. It took several weeks for the accounting department to process invoices and usually had to e-mail back and forth with the sales manager to make multiple corrections. Since both departments used different systems to manage customer accounts, some of the data was redundant and inaccurate (customer accounts would be updated in the sales department, but not in accounting). Although this issue went largely unnoticed during thriving periods, the recent slowdown in the economy revealed potential repercussions of the current business operations, as Boca Electronics began to run short on its cash flows.
In the last month, one of Boca Electronics" largest customers began requiring all its suppliers to integrate their manufacturing operations to improve the sharing of information and further improve its supply chain. This company had recently implemented an ERP system from a major provider and was encouraging its suppliers to do the same. Suppliers had the option of implementing middleware software to integrate operations. Whether suppliers chose to keep their current systems and implement middleware, or implement an ERP system that would integrate with the company, they had one year to make the changes in order to continue doing business with them.
Paul Andrews, the CIO at Boca Electronics, was well aware of the issues facing the company. He knew that something had to be done to improve communication and information sharing within the company, and the current mainframe system was outdated and inefficient. He was also aware of the constraints that Ron was facing in Purchasing and how much it was costing the company. With the new request from one of its largest customers for further integration, the idea of implementing an ERP system for Boca Electronics seemed like a viable solution to Paul. However, recent economic downturns and a limited amount of capital made such a large capital outlay a risky investment for the company.
a. Determine the trade-offs of implementing an ERP system in the company versus buying best of breed software and using middle ware to integrate.
b. What are the potential impacts of such implementation on the company"s suppliers and customers?
c. If the company chose to stay with the system it currently has, what are some potential consequences that can occur in the future?
d. Based on the business nature of the company, the industry, and the current environment, what would you recommend doing?